The Indian population is rapidly ageing. Yet insurance coverage is far from adequate, given that such insurance and pension schemes that do exist are restricted to the organized urban sector and government-run Life Insurance Corporation and four general insurance companies. Combined insurance premium payments are around two per cent of the gross domestic product and should be at least 10 per cent. The report of the Dave committee, setting the direction for pension and insurance reform, and that of the old-age social and income security project, seem to have been shelved. Nothing else can explain the prime ministerís decision to launch the Universal Health Insurance Scheme through four state-run general insurance companies and re-launch the Varishtha Pension Bima Yojana through the LIC, even though they were both part of the 2003-04 budget package. The newly-refined VPBY, announced by the LIC last month, gives policy-holders a guaranteed rate of return of nine per cent, regardless of what happens to interest rates. If there is a gap between LICís earnings on investments and guaranteed returns, the Central government will subsidize the LIC. The age of guaranteed returns lingers on, if only because politicians will also benefit from VPBY. Guarantees could only have been supported had they been meant solely for those who are old today. But it is an open-ended scheme.

The refined VPBY offers an exit option after 15 years and a loan option up to 75 per cent of deposited premium. Among other changes, the maximum age limit has been scrapped, and perhaps the eligibility limit of one person per family will be changed too. But the beneficiary of the VPBY is the urban middle class, the National Democratic Allianceís target in the elections. It is the UHIS that is meant to reassure the poor. For reimbursement of medical expenses, cover for accidental deaths, and compensation for earnings losses at Rs 50 a day, the premium is Re 1 per day for an individual, Rs 1.50 per day for a family of five and Rs 2 per day for a family of seven. For below the poverty line families the government will also contribute Rs 100 a year as an annual premium subsidy. But the devil, as so often with government schemes, is in the detail. Domiciliary hospitalization will not be considered, and pre- and post-hospitalization costs are out too. The eligibility or otherwise of private or non-governmental hospitals needs to be clarified. There are caps on types of costs that can be covered. Had it been possible to identify and target BPL households, and had state governments agreed, subsidies would have worked far better.